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Exchange rate pass-through in a small open economy: the Anglo-Irish case

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  • Eleanor Doyle
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    Abstract

    Bilateral import unit values are constructed to investigate the extent and speed of exchange rate and production cost pass-through into the unit values of Irish imports (total and sectoral) from the UK using Menon's (1996) mark-up model. The approach used to measure exchange rate pass-through is based on cointegration and error-correction modelling and the period of analysis is from 1979 to 1995. Full pass-through from the bilateral Irish pound-Sterling exchange rate and from UK producer costs could not be rejected for total and sectoral import unit values for the sample period 1979q1-1995q4. This implies no role for domestic competing prices in explaining the long-run relationship determining unit values of Irish imports from the UK. The results indicate that for aggregate and sectoral unit values of Irish imports from the UK pass-through is incomplete in the short-run.

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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Applied Economics.

    Volume (Year): 36 (2004)
    Issue (Month): 5 ()
    Pages: 443-455

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    Handle: RePEc:taf:applec:v:36:y:2004:i:5:p:443-455

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    1. Athukorala, Premachandra & Menon, Jayant, 1994. "Pricing to Market Behaviour and Exchange Rate Pass-Through in Japanese Exports," Economic Journal, Royal Economic Society, vol. 104(423), pages 271-81, March.
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    Cited by:
    1. Lian An & Jian Wang, 2011. "Exchange rate pass-through: evidence based on vector autoregression with sign restrictions," Globalization and Monetary Policy Institute Working Paper 70, Federal Reserve Bank of Dallas.
    2. Prema-chandra Athukorala & Jayant Menon, 1992. "Pricing to Market Behaviour and Exchange Rate Pass-Through in Japanese Exports," Working Papers 1992.32, School of Economics, La Trobe University.
    3. Bermingham, Colin, 2005. "Employment and Inflation Responses to an Exchange Rate Shock in a Calibrated Model," Research Technical Papers 2/RT/05, Central Bank of Ireland.
    4. Athukorala, Premachandra & Menon, Jayant, 1995. "Exchange Rates and Strategic Pricing: The Case of Swedish Machinery Exports," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(4), pages 533-46, November.
    5. Sushanta Mallick & Helena Marques, 2008. "Passthrough of Exchange Rate and Tariffs into Import Prices of India: Currency Depreciation versus Import Liberalization," Review of International Economics, Wiley Blackwell, vol. 16(4), pages 765-782, 09.
    6. Andreas Benedictow & Pål Boug, 2013. "Trade liberalisation and exchange rate pass-through: the case of textiles and wearing apparels," Empirical Economics, Springer, vol. 45(2), pages 757-788, October.

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